₦airaland Forum

It is no longer a secret that state governors receive more revenue allocation from the Federal government yet nothing seems to have changed in the states .
Then again, I tried to understand what actually changed in terms of revenue accrued to the states but it wasn't making sense to me.
Let's assume state A receives N500 million per month as allocation in 2022 which is equivalent to around $900,000.
Today, same state is receiving 1 billion, 100% increase! That's massive but scratch a little further and you will discover that 1 billion today is only worth around $625,000.
It gets more confusing when you consider the fact that this oil subsidy was paid in dollars therefore, subsidy recovery is equally in dollars.
Economists in the house, please educate me on the increase in state revenue because it is not adding up on my side .

Are states being remitted in dollars?

helinues:
Are states being remitted in dollars?

What I'm asking is 500M in 2022 and 1 billion in 2025 which is higher in real terms?
I need to hold my governor because I have not seen any improvement since revenue allocation increased but I need to understand what is going on first.

OldNairalander:
What I'm asking is 500M in 2022 and 1 billion in 2025 which is higher in real terms?

We are not spending dollars in Nigeria.

helinues:
We are not spending dollars in Nigeria.

Okay, revenue increased but inflation reduced the real value?

OldNairalander:
Then again, I tried to understand what actually changed in terms of revenue accrued to the states but it wasn't making sense to me.
Let's assume state A receives N500 million per month as allocation in 2022 which is equivalent to around $900,000.
Today, same state is receiving 1 billion, 100% increase! That's massive but scratch a little further and you will discover that 1 billion today is only worth around $625,000.
It gets more confusing when you consider the fact that this oil subsidy was paid in dollars therefore, subsidy recovery is equally in dollars. .

I don't think it works exactly like that.

I'm not an economist so whatever I say is just my best guess.

During the last years of Mr Buhari's government, I believe the govt was spending an estimated $4.5 billion a year on subsidising fuel, and a few billions more to maintain dual naira/dollar exchange rates.

Let's estimate both subsidies to be around $7 billion per year.

Mr Tinubu scrapped both subsidies. That means most of that $7billion is now available for spending on other things like capital and recurrent expenditure (after it is shared between
Federal and State governments), payment of loans, and some savings in the foreign reserve.

Secondly, during the last year of Mr Buhari's govt, Nigeria was producing 1m barrels of crude oil per day. Mr Tinubu's government has succeeded in increasing that above 1.5m barrels.

The extra 500,000 barrels means additional dollar revenue to the federal and state governments. Note that the CBN keeps the dollars and and releases the equivalent naira for sharing by the government's.

Thirdly, on the domestic front, under this government, tax revenues are going gangbusters due to FIRS in particular, generating record revenues. With more revenues coming on, the States' share also increases.

As to why despite a disadvantageous exchange rate - compared to some years back, States are now able to do more, it comes down to one simple fact:

The amount they are sharing with the FG is about 3.5 times what it used to be while the exchange rate has only increased by a factor of 2.3 or thereabout from around $680 - $700 where it was before.

Above all, the money is regular, unlike before where there simply was not enough money available for sharing, and during some months, there was nothing to share so many States depended on borrowing.

Since last year, the cash tap has been gushing and doing so consistently. The States are awash with cash right now. It now depends on how each Governor decides to use that money for the benefit of his people.

That's what I think has happened.

helinues:
Are states being remitted in dollars?

Allocations are not being remitted to states in dollars. However, we know that what 500 million naira was worth in 2023 is not what it's worth today, it has significantly depreciated in value.

Yes, allocations to states have increased, but the gains have long been eroded by the depreciation of the naira

It’s like taking one step forward and three steps backward

helinues:
We are not spending dollars in Nigeria.

Ok, let me help you understand, if a state receive 500million then it will buy 2.5million litres pms@200 per litre, but now to get that 2.5m litres the state that received 1 billion will need 2.25billion naira@900 to fuel the same number of cars. Hope you understand it, the same in road construction, diesel and salary, so where is the increase in allocation.

helinues:
We are not spending dollars in Nigeria.

Job, yes or no?

The increased allocation is mere propaganda
The states are getting more money but it is not even double of what they used to get in terms of real value. At best, it's a 150% increase while naira was devalued by over 300%.
Meanwhile: oil price has been reasonably high, naira has been devalued, tax collection has increased and no subsidy payment
If you look at the figures, it simply does not match up with the propaganda claims of increased allocation

helinues:
Are states being remitted in dollars?

Imagine this slave reasoning.

DeLaRue:
I don't think it works exactly like that.

I'm not an economist so whatever I say is just my best guess.

During the last years of Mr Buhari's government, I believe the govt was spending an estimated $4.5 billion a year on subsidising fuel, and a few billions more to maintain dual naira/dollar exchange rates.

Let's estimate both subsidies to be around $7 billion per year.

Mr Tinubu scrapped both subsidies. That means most of that $7billion is now available for spending on other things like capital and recurrent expenditure (after it is shared between
Federal and State governments), payment of loans, and some savings in the foreign reserve.

Secondly, during the last year of Mr Buhari's govt, Nigeria was producing 1m barrels of crude oil per day. Mr Tinubu's government has succeeded in increasing that above 1.5m barrels.

The extra 500,000 barrels means additional dollar revenue to the federal and state governments. Note that the CBN keeps the dollars and and releases the equivalent naira for sharing by the government's.

Thirdly, on the domestic front, under this government, tax revenues are going gangbusters due to FIRS in particular, generating record revenues. With more revenues coming on, the States' share also increases.

As to why despite a disadvantageous exchange rate - compared to some years back, States are now able to do more, it comes down to one simple fact:

The amount they are sharing with the FG is about 3.5 times what it used to be while the exchange rate has only increased by a factor of 2.3 or thereabout from around $680 - $700 where it was before.

Above all, the money is regular, unlike before where there simply was not enough money available for sharing, and during some months, there was nothing to share so many States depended on borrowing.

Since last year, the cash tap has been gushing and doing so consistently. The States are awash with cash right now. It now depends on how each Governor decides to use that money for the benefit of his people.

That's what I think has happened.

why despite the plenty money why has the 2025 budget money has not been released almost have of the year and salaries are always paid late ,workers and pensioners entitlement are in years of arrears which do not happened under Buhari
All these achievements are on paper but the reality is very different
Just like guy you responded to noted the real value of the money to the states are less in real value than before ,and will accomplish less because of the prevailing inflation

OldNairalander:
What I'm asking is 500M in 2022 and 1 billion in 2025 which is higher in real terms?
I need to hold my governor because I have not seen any improvement since revenue allocation increased but I need to understand what is going on first.

Let us see how to break this down
In 2022 dollar rate was #440
In 2025 dollar rate is #1500
In 2022 minimum wage was #30000
In 2025 minimum wage is #70000
In 2022 subsidy of petroleum reduced allocation to states and the fg was literally funding the exchange market to keep it stable
In 2022 the inflation rate was 18%
In 2024 the inflation was 33% we are expecting 2025 figures
In 2025 allegedly subsidy is been removed and the dollar is allowed to float to what it is now

Now to what you asked..what is happening with the alleged increase in state allocation.
Well nothing has changed
If a state collected #5 billion per month in 2022(@450 to one dollar,#30000 minimum wage and etc)
In 2025 that state collecting #10 billion (#1500 to a dollar,#70000 minimum wage and it's antecedent inflation hitting it)

So while the fg has hands off per se from subsidy of petroleum products....hmmm which the nnpcl still sending claims to the fg.
Leading to increase in available funds for disbursement to states
The issue of inflation,increase in the dollar rate exchange and cost of doing business somehow is affecting govt expenditure
Also because of political pressures government is. Forced to borrowed funds leading to reduced disbursement to state allocation
A merry go round

Then we have the cost of the wars going on the north

One way to clearly understand it
Is to look at a working person
If at 2022 an employee earned #30000 per month paid #7000 for rent,bought fuel at 400paid power,bought foodstufs in 2022
Now in 2025 he earns #70000 minimum wage but he is paying #10000 per month on rate and #1000 per liter on fuel and foodstuffs at the current rate plus the infamous band a electric power bill
You will ask where did all the money go

So that is what the government is facing
It says it has increased but a lot of things is affecting those earnings

Now the issu of subsidy payment
It is a back and forth per se
I think under Jonathan nnpcl and consaid they were paying for 30 million litres and under buharis partial subsidy removal it jumped to 60 million litres and now it has dropped
The fg said that it has no payment for subsidy from the nnpcl but with the refineries now offline,your guess is as good as mine
Oil refineries are buying crude in dollars and pay expatriates in dollars.services in dollars.
And you will realize a demand gap for dollars and to it

You go dey trust these corrupt souls? They will always mismanage things as far as they're in power.

baralatie:
So while the fg has hands off per se from subsidy of petroleum products....hmmm which the nnpcl still sending claims to the fg.
Leading to increase in available funds for disbursement to states
The issue of inflation,increase in the dollar rate exchange and cost of doing business somehow is affecting govt expenditure
Also because of political pressures government is. Forced to borrowed funds leading to reduced disbursement to state allocation
A merry go round

That is what some of us are saying, why did Tinubu do what he did because some of us were shouting that he is putting the cart before the horse and it will backfire badly, some of us saw all of these but we were called haters for speaking the truth...

Look at it now so it means Tinubu is punishing Nigerians who are going through a lot for nothing...

Brendaniel:
That is what some of us are saying, why did Tinubu do what he did because some of us were shouting that he is putting the cart before the horse and it will backfire badly, some of us saw all of these but we were called haters for speaking the truth...

Look at it now so it means Tinubu is punishing Nigerians who are going through a lot for nothing...

No that is not the scenario
Tinubu has no. Hoive but to make those decisions because it was very clear from the fg accounts
There was no money to run govt
He inherited a budget that was already spent

Agbegbaorogboye:
The increased allocation is mere propaganda
The states are getting more money but it is not even double of what they used to get in terms of real value. At best, it's a 150% increase while naira was devalued by over 300%.
Meanwhile: oil price has been reasonably high, naira has been devalued, tax collection has increased and no subsidy payment
If you look at the figures, it simply does not match up with the propaganda claims of increased allocation

please stop spreading propaganda, your hypocrisy will not allow u say the truth & blame the various states of the federation for doing nothing to improve the lives of the indigenes, u must find a way to blame only president Tinubu..

Brendaniel:
That is what some of us are saying, why did Tinubu do what he did because some of us were shouting that he is putting the cart before the horse and it will backfire badly, some of us saw all of these but we were called haters for speaking the truth...

Look at it now so it means Tinubu is punishing Nigerians who are going through a lot for nothing...

Guy go & study logically, the petroleum industry act 2021, not President Tinubu removed oil subsidy, ignorance is never an excuse.

President no get power to remove oil subsidy, na only an act of legislation can do that.

Black man no go ever study critically, na them tell me be em own.

baralatie:
No that is not the scenario
Tinubu has no. Hoive but to make those decisions because it was very clear from the fg accounts
There was no money to run govt
He inherited a budget that was already spent

And what did he do ?

damage it more?

what has he saved at the end..... nothing

And Nigerians are paying more for food and so on...

And besides he supported the destruction of Nigeria for 8 years because he wanted to be president....

how greedy, selfish and wicked can he be....

Burob:
Guy go & study logically, the petroleum industry act 2021, not President Tinubu removed oil subsidy, ignorance is never an excuse.

President no get power to remove oil subsidy, na only an act of legislation can do that.

This is not even about only subsidy, and it has nothing to do with the petroleum act because Buhari was still paying subsidy till his tenure finished.... are you saying Buhari was breaking the law since 2021?

the way you guys lie to defend nonsense....

Brendaniel:
And what did he do ?

damage it more?

what has he saved at the end..... nothing

And Nigerians are paying more for food and so on...

And besides he supported the destruction of Nigeria for 8 years because he wanted to be president....

how greedy, selfish and wicked can he be....

please can you mention just 2 things that your state Governor in the last 2 years has implemented to improve your existence in your abode?

Burob:
please can you mention just 2 things that your state Governor in the last 2 years has implemented to improve your existence in your abode?

Leave my state governor alone, he did not devalue the naira, neither did he stop fuel subsidy or increase tax

Brendaniel:
This is not even about only subsidy, and it has nothing to do with the petroleum act because Buhari was still paying subsidy till his tenure finished.... are you saying Buhari was breaking the law since 2021?

the way you guys lie to defend nonsense....

ignorance like I said is never an excuse, subsidy under the petroleum act 2021 was scheduled to be removed 20 months after it was passed into law, the APC led legislators made it so that it kicked in after they had won the general election in 2023.

It is all there in black & white, but as usual the black man does not read, he prefers to assume.

Burob:
please stop spreading propaganda, your hypocrisy will not allow u say the truth & blame the various states of the federation for doing nothing to improve the lives of the indigenes, u must find a way to blame only president Tinubu..

Where did you see Tinubu's name in my writeup
Are you scamming people again

Burob:
ignorance like I said is never an excuse, subsidy under the petroleum act 2021 was scheduled to be removed 20 months after it was passed into law, the APC led legislators made it so that it kicked in after they had won the general election in 2023.

It is all there in black & white, but as usual the black man does not read, he prefers to assume.

Since you read it, can you give me a copy of the one you read and that part that says it will end 20 months after it was passed?

please prove me wrong and I will apologize to you...

OldNairalander:
What I'm asking is 500M in 2022 and 1 billion in 2025 which is higher in real terms?
I need to hold my governor because I have not seen any improvement since revenue allocation increased but I need to understand what is going on first.

ssalary and state expenses are in Naira. Only capital equipment and few other things need dollar or foreign currencies.